M&S Bank cuts the cost of £5k-plus loans but ups rates for those borrowing more

M&S Bank has cut the cost of its personal loans of between £5,000 and £7,499, but has unexpectedly increased the interest charged on some of its larger loans.

Loans of between £5,000 and £7,499 over one to five years are now available from M&S at 7 per cent, down from 7.3 per cent.

But while the UK's loan industry is engaged in a price war, which saw Clydesdale and Yorkshire Banks this week announce a new decade-low rates on some loans, M&S Bank has quietly upped its rate for loans of between £7,500 and £15,000.

The bank had reduced its rates on these loans to a then market-leading 5.5 per cent in early-November, down from 5.8 per cent, only to be usurped a day later by Sainsbury's Bank which announced a 5.4 per cent rate. M&S Bank, which is backed by HSBC, has now increased its rate to 5.6 per cent.

Rate change: M&S Bank has reduced its interest rate on loans between £5,000 and £7,500, but increased it slightly for larger loans.

When asked by This is Money why it had increased its rate on loans between £7,500 and £15,000, M&S Bank said that the lower rates are 'limited offers' and that it was 'constantly reviewing its rates'.

Regarding the cut in rates for smaller loans, chief executive Colin Kersley said: 'We're conscious of the need to reduce the cost of borrowing for our customers, so we're constantly reviewing our rates to ensure we're offering the best rates we can.

'We're also pleased to be able to extend our loyalty point offering for a limited period to include loan applications from our existing current account and credit card customers, who already enjoy loyalty points on their credit card and debit card spend.'

Those with M&S credit cards or current accounts who take out loans of between £5,000 and £7,500 before February 6 can get 5,000 loyalty points, worth £50, to spend in M&S. Those taking out £7,500 to £15,000 will get points worth £100.

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A loan of £7,000 taken out at the new 7 per cent rate over three years will mean total repayment of £7,756.20 at £215.45 a month, where previously under the 7.3 per cent rate it would have been £7,815.64 at £217.10.

However, the bank is only required to offer the best advertised rate to 51 per cent of successful applicants, with the rest offered higher interest rates.

To get a loan with M&S, you need to be a UK resident aged 30 or over or a homeowner.

Personal loan rates have been falling steadily over the past year and have now reached their lowest level in the past decade.

And while M&S Bank said it was constantly reviewing rates to offer the best deals, the common trend in recent months has been to reduce rates on loans between £7,500 and £15,000, with uSwitch.com saying it would not be surprised to see rates fall below the 5 per cent mark this spring.

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